QUESTION 4 [25 marks] chapter 14 Assume that the market for fertilizer is perfectly competitive. Firms in the market are producing output but they are experiencing economic losses. Check in your textbook when this happens in term of covering some costs and not being able to cover some other costs. a. [5 marks] Explain how ATC, AVG and MC are related {Note: the relationship of these cost curves is same whether there is loss or profit). b. [5 marks] Explain how the Price of fertilizer compares to the ATC, AVG and MC of producing fertilizer. Carefully read the question and make sure that you answer all relevant details. [You have to compare price with ATC. AVG and MC for a firm that is described in the question (one that is making losses but still producing)] c. [7 marks] Draw two graphs side by side illustrating the present situation for the single firm and the entire market. Clearly label the diagrams and explain what you draw for both diagrams. Along with the diagram, first theoretically explain the situation when firms are operating despite making economic losses. [In this part, only show the shortrun equilibrium for both the firm and the market] d. [3 marks] Assuming there is no change in demand curve or in cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market. Draw a new set of diagrams to show the firm's and market's long-run equilibrium. Each change on the diagrams should be explained step by step to qualify for marks. [Start with the same set of diagrams that you draw in c) and then show how price and quantity reach the longrun equilibrium for the firm and for the market]